IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF DELAWARE

INTELLECTUAL VENTURES I LLC

and INTELLECTUAL VENTURES II
LLC,

)
)
)
)
Plaintiffs,
)
)
) Civ. No. 13-453-SLR/SRF
v.
)
)
TOSHIBA CORPORATION, TOSHIBA
AMERICA, INC., TOSHIBA AMERICA )
ELECTRONIC COMPONENTS, INC., )
TOSHIBA AMERICA INFORMATION
)
SYSTEMS, INC.,
)
)
)
Defendants.

MEMORANDUM ORDER

At Wilmington this

~day of May, 2015,

having reviewed defendants' motion for

partial stay pending inter partes review {"IPR") 1 and the papers submitted in c:onnection
therewith;
IT IS ORDERED that said motion {D.1. 40) is denied, for the reasons that follow:
1. Procedural background. Plaintiffs Intellectual Ventures I LLC and
Intellectual Ventures II LLC {collectively "IV"), after several years of failed negotiations,
filed this patent infringement action on March 20, 2013 against defendants Toshiba
Corporation, Toshiba America, Inc., Toshiba America Electronic Components, Inc., and
Toshiba America Information Systems, Inc. (collectively, "Toshiba"). In the following

Pursuant to 35 U.S.C. 311 et seq.

months, Toshiba petitioned for IPR of five of the ten patents-in-suit {"the IPR patents), 2
and filed four preliminary motions in the above captioned litigation, 3 including the instant
motion for partial stay of the case as it relates to the IPR patents.
2. Standard of review. As recognized by the Supreme Court of the United
States, "the power to stay proceedings is incidental to the power inherent in every court
to control the disposition of the causes on its docket with economy of time and effort for
itself, for counsel, and for litigants." Landis v. North American Co.,

29~~

U.S. 248, 254

(1936). Put another way, the decision of whether to grant a stay rests within the sound
discretion of the court through the exercise of judgment, "weigh[ing] competing interests
and maintain[ing] an even balance." Id. See also Cost Bros. Inc. v. Travelers
Indemnity Co., 760 F.2d 58, 60 {3d Cir. 1985); Ethicon, Inc. v. Quigg, 849 F.2d 1422,
1426-27 (Fed. Cir. 1988). Since the enunciation of the standard by tho Supreme Court
in 1936, courts have identified the ubiquitous "factors" which should be used as
guidance in determining whether a stay is appropriate, for instance:
"{i) whether a stay would unduly prejudice or present a clear tactical
disadvantage to the non-moving party; {ii) whether a stay will simplify
the issues in question and trial of the case; and {iii) whether discovery
is complete and whether a trial date has been set." Xerox Corp. v.
3Com Corp., 69 F. Supp. 2d 404, 406 (W.D.N.Y. 1999); see also
United Sweetener USA, Inc. v. Nutrasweet Co., 766 F. Supp. 212,

2The Patent Trial and Appeal Board ("the PTAB") has instituted review of four of
the five patents-in-suit as follows: {1) U.S. Patent No. 6,058,045 - IPR filed on October
31, 2013 and instituted on May 5, 2014; (2) U.S. Patent No. 7,836,371 - IPR filed on
December 30, 2013 and instituted on July 11, 2014; (3) U.S. Patent No. 5,6ci7,132 IPR filed on December 31, 2013 and instituted on June 17, 2014; and (4) U.S. Patent
No. 5,500,819 - IPR filed on February 7, 2014 and instituted on August 8, 2014. The
PTAB rejected IPR review for U.S. Patent No. 6,618,788. {D.I. 50 at 3)
3

(D.I. 12, 28, 40 and 115)

2

217 (D. Del. 1991 ).

Nokia Corp. v. Apple, Inc., Civ. No. 09-791-GMS, 2011 WL 2160904 at *1 (D. Del. June
1, 2011 ). Although this case is not subject to 18 of the America Invents Act ("AIA"), it
is instructive (since defendants reference the AIA in any event)4 to address a fourth
factor, that is, "whether a stay, or the denial thereof, will reduce the burden of litigation
on the parties and on the court." AIA 18(b)(1)(D).
3. Analysis. I start with the recognition that the instant litigation reflects a
business dispute between patent owners and alleged infringers. Traditionally, most
business disputes were, and should have been, resolved through a business solution; 5
because businesses are really people, business solutions are not gem:~rally reached
without the motivating force of a firm trial date. Of course, the traditional playing field
for patent disputes has been dramatically altered by such legislation as the AIA and its
far-reaching ramifications, including its intrusion into the courtroom and the

E~xercise

of

judicial discretion, 6 and the generation of a cottage industry for administrative review of
patent validity. In this regard, recall that up until the 1990s and the Federal Circuit's
decision in State Street Bank & Trust Co. v. Signature Fin Group, Inc., 149 F.3d 1368

Toshiba, in fact, noted at the outset of its argument that, "[b]y E~nacting the AIA,
Congress replaced the pre-existing inter partes reexamination procedure with the IPR
procedure with the intent to provide a 'faster, Jess costly alternative to civil litigation to
challenge patents."' (D.I. 41 at 7) (citations omitted) I note for the record that no one
apparently expects the parties themselves or their counsel to exercise any self-restraint
during the litigation process, instead requiring such to be thrust upon them by judicial
mandate or legislative fiat.
4

Compare, e.g., Versata Software, Inc. v. Callidus Software, Inc., 771 F.3d 1368
(Fed. Cir. 2014), and D.l.s 148 and 150 of Civ. No. 12-931 (D. Del.).
6

See, e.g., AIA, 18(b){2).

{Fed. Cir. 1998), abrogated by In re Bilski, 545 F.3d 943 (Fed. Cir. 2008),

the~re

was a

reluctance to find computer-based inventions patentable. See, e.g., 33 Fed. Reg.

15581, 15609-10 (1968); Diamond v. Diehr, 450 U.S. 175, 219 (1981) {J. Stevens,
dissent). Once the floodgates opened, the number of issued patents 9rew
exponentially. Indeed, the number of utility patents issued annually by the PTO more
than doubled between 1998 and 2014. U.S. Patent and Trademark Office, Patent
Technology Monitoring Team (PTMT), Extended Year Set- all Technologies (Utility
Patents) Report (Mar. 18, 2015). 7 The number of issued patents in thf;) category of
"data processing: software development, installation, and management"8 increased
from 318 patents in 1998 to 2,193 in 2014. U.S. Patent and Trademark Office, Patent
Technology Monitoring Team (PTMT), Patent Counts By Class By Year(Mar. 18,
2015). 9 The relevant categories for the IPR patents present similar increases: "static
information storage and retrieval" increased from 1,515 in 1998 to 2,930 in ~~014; 10
"active solid-state devices (e.g., transistors, solid-state diodes)" from 2,418 to 9,991 ;11
"error detection/correction and fault detection/recovery" from 1,076 to 2,696. 12 Id.
Inevitably, business models changed and some of the original patentees sold

Available at http://www.uspto.gov/web/offices/ac/ido/oeip/taf/h_at.htrn.

Class 717.

Available at http://www.uspto.gov/web/offices/ac/ido/oeip/taf/cbcby.htm.

10

Class 365, U.S. Patent Nos. 5,500,819; 5,687, 132; and 6,058,045.

11

Class 257, U.S. Patent No. 6,058,045.

12

Class 714, U.S. Patent No. 7,836,371.

their intellectual property to others (often "non-practicing entities") rather than try to
monetize or otherwise enforce their entire portfolio themselves. By all accounts, when
the new owners engaged their business model and started to aggressively enforce their
patents through litigation against even leaders in the industry (among many others), the
considerable resources of the business community coalesced and lobbied Congress
successfully to "reduce the burden of litigation" by (in effect) shifting the costs to the
public. Rather than resolving business disputes, we are now reviewin~J patents through
the administrative lens of the PTO, which has had to increase its size by several
thousand employees (a 31 % increase in personnel) to take on the tasks assigned by
Congress. U.S. Patent and Trademark Office, Performance and Accountability Report
(PAR), Fiscal Year 2014, at 169 & Table 29 (Mar. 18, 2015). 13 Consistent with its
mandate, the PTAB has accepted 65% of the patent claims challenged through IPR,
and has found 38% of those claims invalid. U.S. Patent and Trademark Offk::e, Inter
Partes Review Petitions Terminated to Date (April 30, 2015). 14 It perhaps is
understandable, then, that I approach this exercise with a degree of cynicism.
Nevertheless, with this context in mind, I will analyze the facts of record under the
appropriate standard of review.
4. Undue prejudice. As courts have recognized, plaintiffs "will suffer some
prejudice from a stay, due to loss of their chosen forum, the possibility of necessary
witnesses' memories fading, and negative impact on their ability to license the patents-

13

Available at http://www.uspto.gov/about/stratplan/ar/USPTOFY2014PAR.pdf.

14

Available at http://www.uspto.gov/sites/default/files/documents/inter__partes_
review_petitions_%2004%2030%202015_ 0 .pdf.

in-suit." Benefit Funding Sys. LLC v. Advance Am., Cash Advance Centers, Inc., Civ.
No. 12-801-LPS, 2013 WL 3296230, at *2 (D. Del. June 28, 2013). Because patent
licensing is a core aspect of IV's business, and because there has alrnady been
substantial delay (pre- and post-litigation) in moving the parties' dispute forward, I find
that a stay would unduly prejudice and present a clear tactical disadvantage to IV.
5. "It is well settled that before a stay may be issued, the petitioner must
demonstrate 'a clear case of hardship or inequity,' if there is 'even a fair possibility' that
the stay would work damage on another party." Gold v. Johns-Manville Sales Corp.,
723 F.2d 1068, 1075-76 (3d Cir. 1983) (quoting Landis, 299 U.S. at 255). Toshiba has
not demonstrated a clear case of hardship or inequity if the motion for stay is denied.
Toshiba chose to contest validity through the IPR process and, therefore, cannot
complain that it is being prejudiced by the dual track proceedings it initiated. See
Clouding IP, LLC v. SAP AG, Civ. No. 13-1456-LPS, D.I. 35 (D. Del. ,Jan. 21, 2014).
6. Timing. This factor - the comparative progress of the litigation vis a vis the
IPR - overlaps with the first factor - the comparative prejudice to the non-moving vis a
vis the moving parties. In this regard, courts look to such factors as the timing of the
review request, the timing of the request for stay, the status of the review proceedings,
and the status of the litigation. Looking at the facts of this case, Toshiba filed its
request for review after the litigation was instigated, and the request for stay was not
filed until after Toshiba's preliminary wave of motions was decided and a scheduling
conference was set. 15 "A request for reexamination made well after the onset of
15

The decisions issued on September 3, 2014 (D.I. 33), a scheduling conference

was set by order dated September 22, 2014 (D.1. 39), and the motion at bar was filed

litigation followed by a subsequent request to stay may lead to an inference that the
moving party is seeking an inappropriate tactical advantage." Belden Techs. Inc. v.
Superior Essex Comm'ns LP, Civ. No. 08-63-SLR, 2010 WL 3522327, at *2 (D. Del.

Sept. 2, 2010). Such an inference could be drawn from the facts of record.
7. Simplification. The facts of record further demonstrate that a stay will not
simplify the issues in question and trial of the case, primarily because the NANO flash
memory technology is at issue in both the IPR patents and other patents-in-suit not
subject to the IPR. In other words, discovery on those products will proceed regardless
of whether the stay is granted or not; the burden of litigation will not be reduced even if
a stay were put in place. 16
8. Indeed, under the circumstances of the instant litigation - thH relatively
advanced status of the review proceedings as compared to the trial date - not staying
the case will provide the benefits identified by Toshiba. The IPR determinations are
expected by August 2015, before the claim construction exercise in this case
concludes. Rather than stay and fragment the litigation process, 17 it makes imminent

on September 26, 2014 (D.I. 40). A scheduling order was entered on October 30,
2014, with a trial date of January 17, 2017. (D.I. 55)
16

As noted by Toshiba, if IV amends any claims during the IPR, IV may lose the
right to enforce those claims against Toshiba. 35 U.S.C. 318(c). Toshiba goes on to
argue that "the IPR could nullify any work performed by the Court and the parties
related to the IPR patents, potentially wasting judicial resources and resulting in
unnecessary cost to the parties." (D.I. 41 at 9-10) Given the circumstances of the
case, however, where IV has decided it will not seek to amend any claims in the '045,
'371 or '132 IPR proceedings, and where there is overlapping discovery in any event,
Toshiba's argument in this regard is not a persuasive one.
17

Recalling that Toshiba's NANO flash memory products are at issue with respect
to both the IPR and some of the non-IPR patents.
7

sense to proceed with the litigation and take whatever guidance and valuable analysis
provided by the PTAB into account as is appropriate.
9. Regarding validity, because Toshiba chose to take the validity dispute to the
PTAB through the IPR procedure rather than litigating validity in this court, Toshiba is
now estopped from challenging validity of the IPR patents in any civil action based "on
any ground that the petitioner raised or reasonably could have raised during that inter
partes review." 35 U.S.C. 315(e)(2). Consequently, the parties no longer need to
litigate those validity issues with respect ta the four IPR patents in this action.
10. As to claim construction, it is important to acknowledge that, at this
juncture, the PTAB and the courts apply different standards. "[U]nlike in district courts,
in reexamination proceedings claims are given their broadest reasonable interpretation,
consistent with the specification .... " In re Swanson, 540 F.3d 1368, 1377-'78 (Fed Cir.
2008) (internal citation marks omitted). See a/so 37 C.F.R. 42.1 OO(b). In contrast to
this more lenient standard of proof, district courts have been directed to use a "propermeaning approach" to claim construction, as illustrated in Phillips v. AWH Corp., 415
F.3d 1303 (Fed. Cir. 2005) (en banc). 18 Robert M. Asher, Harmonizing Standards for

District Court and PTAB Claim Construction, American Bar Association (Aug. 4, 2014). 19
In addition, in PTO proceedings, the standard of proof - a preponderance of evidence -

18

1 suggest that the "expertise" of the PTO is better suited to its broadest
reasonable construction approach, while the adversarial give-and-take of litigation
which sheds light on motive and a more extensive range of information (even if extrinsic
and used sparingly) is better suited to the proper-meaning approach.
19

Available at http://apps.americanbar.org/litigation/committees/intellectual/
articles/summer2014-0814-harmonizing-stand ards-district-court-ptab-clai m-construction
.html.
8

is substantially lower than in a civil case, In re Caveney, 761 F.2d 671, 674 (Fed. Cir.
1985), where the standard is "clear and convincing" evidence with a presumption of
validity. See In re Etter, 756 F.2d 852, 857 {Fed. Cir. 1985). And, of course, the PTO
generally is limited in its validity review with respect to the challenges it may consider.

See, e.g., Ethicon, 849 F.2d at 1427. Clearly, then, "precise duplication of effort does
not occur'' because of the above described differences between administrative and
judicial proceedings. See id.
11. I recognize, as Toshiba argues, that denying the stay as to the IPR patents
"risks the very real possibility that this Court and the PTO could issue inconsistent
rulings, requiring the Federal Circuit to overturn this Court's decision in favor of the
PTO's decision on invalidity." {D.I. 41at14-15) Such a risk was contemplated before
the enactment of the AIA, see Ethicon, 849 F.2d at 1429; it is a risk that is minimized
under the extant circumstances and, in any event, has not {to the bes1t of my
knowledge) generated much concern or resulted in the contemplated "awkwardness" at
the Federal Circuit or elsewhere. Indeed, when you keep both the administrative and
judicial tracks moving, the competitive business world benefits from the timely
presentation of both in the Federal Circuit, the final arbiter of any substantive
differences: more information generally makes for a better decision.
12. Conclusion. I conclude that Toshiba has not carried its burden of
persuasion that a stay is warranted under the facts of this case. Because the potential
simplification from the IPR has either already accrued {e.g., in the case of validity) or
will accrue before it is needed without a stay (e.g., claim construction or summary

judgment briefing), a stay is not warranted at bar. Toshiba's arguments to the contrary
are either speculative or fail to consider the timing issues and subject matter overlap
described above.

10